I came across an incredible stat last night:
Worldwide venture funding has nearly doubled YoY reaching $125B and grew by half QoQ in Q1 2021, according to Crunchbase. On average, two startups crossed the unicorn valuation threshold each working day during the first three months of the year.
Users increasing their engagement with online tools due to the pandemic, along with easier exits via Special Purpose Acquisition Vehicles (SPACs), were two big factors in this extraordinary increase. I’d also be willing to bet that a big jump in the money supply, which is showing up everywhere from meme stocks to cryptocurrenices, is a factor.
In startups I’m looking at, I’m seeing valuations in the $10-15 million range even on seed stage companies. A few years ago, that might have been $5-6 million. I can’t say I love those higher prices, but if a company achieves a valuation of $1 billion (not to mention $10 or $100 billion), whether you got in at a $5 or $15 million valuation may not matter.
I’ll be watching to see if these trends continue or if the industry is setting itself up for a crash. With consumers becoming more and more used to doing everything online during 2020, along with loose monetary policy, I think that any downturn is probably quite a ways off.
For more on venture capital and startups, check out these posts:
- Key Metrics for Startups: Consumer vs. Enterprise SaaS
- Unicorns Are Being Minted Faster Than Ever
- This Is How Startups Pitch Investors
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